Field Notes · 8 min read

EOR, BOT or your own entity?

If you run a fifty-person software company in the United States or Europe and you are considering hiring in India, the first real decision is not which city or which recruiter. It is the legal shape of the arrangement, and getting that wrong is expensive in ways that only show up eighteen months later.

There are three routes: employing people through an Employer of Record, running a Build-Operate-Transfer programme, or incorporating your own Indian subsidiary from the start. All three are legitimate. They suit very different situations, and the honest answer for a company hiring its first three people in Bengaluru is usually not the one that sounds most impressive in a board meeting.

Employer of Record: rent the compliance

Under an EOR arrangement, a licensed Indian employer hires your people on paper. They issue the employment contract, run payroll, make statutory contributions and file what needs filing. You choose every candidate, set the work, run the one-to-ones and decide about promotions. Practically, they are your team. Legally, someone else carries the employment relationship.

The appeal is speed and reversibility. There is no incorporation, no minimum capital, no Indian director to appoint, no annual filings to keep up with, and no awkward wind-down if the plan changes. Four to six weeks from a signed brief to someone onboarded is realistic. If it does not work, you give thirty days notice and stop.

The cost is a monthly fee per employee on top of salary. That is excellent value at three people and irritating at twenty-five, which is exactly why most companies treat EOR as a starting position rather than a destination. Watch for two details when you compare providers: whether the fee is a flat amount or a percentage of salary (percentages quietly grow every time you give someone a raise) and whether the employment contract assigns intellectual property to your company rather than to the EOR.

Build, Operate, Transfer: someone else runs it until you are ready

In a BOT arrangement, a partner builds the team and operates it for an agreed period, then transfers the entity, the contracts and the people to you. It is the middle path: you get a functioning centre without learning Indian employment law first, and you end up owning it.

BOT earns its keep when you are reasonably confident you will end up with fifteen to fifty people, but you do not want to spend your own management time on incorporation, office leases and payroll vendors while the team is still small. The partner absorbs that, and you buy it back later at a price agreed in advance.

The failure mode is entirely predictable and entirely avoidable: transfer terms left vague in the first contract. If the price, the date, the treatment of employee tenure and the consequences of an early exit are not written down before the first hire, you will negotiate them at the exact moment you have no leverage. Ask for those clauses on day one. A partner who resists is telling you something useful.

Your own entity: control, and the paperwork that comes with it

Incorporating a private limited subsidiary gives you complete control: your brand on the offer letter, your policies, your equity if you want to grant it, and no per-head fee. For IP-heavy work, regulated customers or a team you expect to grow past twenty-five people, it is usually where you end up.

It is also a real commitment. Expect two to three months before anyone can be paid through the entity, a resident director requirement, statutory audits, transfer pricing documentation for the intercompany charge, and ongoing filings whether or not the business is doing anything. None of it is difficult with a competent chartered accountant. All of it is a standing obligation that does not pause when you are busy.

The crossover point nobody calculates

There is a headcount at which EOR fees exceed the annual cost of running your own entity: the accountant, the compliance calendar, the payroll vendor, the director, the audit. For most companies hiring standard technology roles in Bengaluru, that crossover lands somewhere between ten and twenty-five people, depending on the fee structure you negotiated and how much of the administration you are willing to do in-house.

Work it out before you start, not after. Two numbers make the decision for you: your expected headcount in eighteen months, and the all-in annual cost of the entity route at that headcount. If you are confident you will pass the crossover, starting with EOR and converting later is still often correct, but you should choose it deliberately, and you should make sure your EOR contract allows the transfer of employees to your own entity without penalties or a fresh probation period.

A short decision checklist

• Under ten people, or still testing the idea? Start with an Employer of Record.
• Confident about fifteen to fifty people, but short on management bandwidth? Build-Operate-Transfer, with the transfer terms written into the first contract.
• IP-critical work, regulated customers, or a plan past twenty-five people? Incorporate, and get help running the setup.
• Not sure yet? EOR is the cheapest way to buy yourself another year of information, provided the contract lets you convert cleanly.

The part that actually determines success

Having chosen a structure, it is worth saying plainly that the structure is not what makes an India team work. The first three or four hires do. They set the standard everyone after them is measured against, they become the reason good candidates say yes, and if they leave in year one you are effectively starting again with a worse reputation in the market.

So spend the effort there. Pay properly for the founding hires rather than optimising the last ten percent. Give them work that matters instead of the tickets nobody at head office wants. Put someone from your own team on a plane within the first quarter. And be honest with yourself about the time zone: a team you speak to twice a week will behave like a supplier, because that is what you have made it.

Working through this decision for your own company? We model the crossover point, the fully loaded cost per role and the realistic hiring timeline in a twenty minute call, and send you the written version afterwards. Get in touch.